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The Ministry of Finance and the State Administration of Taxation
Official Reply of the Ministry of Finance and the State Administration of Taxation Concerning Tax Policies in the Enforcement of the
Provisions of the State Council on Encouraging Foreign Investment (Excerpt)
CaiShuiWaiZi [1987] No.118
January 1, 1987
With regard to preferential tax treatment accorded by the Article 22 to export-oriented enterprises with foreign investment, the
Ministry of Foreign Economic Relations and Trade promulgated specific measures on January 5 of this year by WaiJingMaoZiZongZi [87]
No.1, which stipulate an enterprise with foreign investment may not be recognized as export-oriented enterprises unless three conditions
are simultaneously met. First, it must be an enterprise that produces products for export. Second, its products are mainly for export
and the annual value of exported products must constitute over 50 percent of its total production value in the same year. Third,
foreign exchange income and expenses in the same year must be in balance or surplus. It was also stipulated that a recognized export-oriented
enterprise may not enjoy the preferential tax treatment accorded by Article 22 unless the value of its exported products reaches
over 70 percent of its total production value in the same year and qualify annual review.
Therefore, though the income tax of remitted profits that has been exempted and corporate income tax that has been deducted by half
in the same year must be refunded if the enterprise fails to meet in the annual review all the three conditions for export-oriented
enterprises.
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The Ministry of Finance and the State Administration of Taxation
1987-01-01
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